The IRS opened their e-filing on January 28th and many people are now filing their taxes.

While the new tax laws have changed a few things this year, most rules regarding cryptocurrencies have remained the same.

If you are new to including cryptocurrency in your tax returns, or just could do with a refresher, here are 10 useful pieces of information.

1. Profits from cryptocurrencies are capital gains

A tax event occurs whenever you dispose of any cryptocurrency. For each event, you have to calculate if you made or lost any money. These are declared as capital gains/losses (Schedule D) on your tax forms.

This includes:

selling crypto for fiat currency, e.g. trading it on an exchange for dollars

trading one crypto for another, e.g. buying ETH with BTC, as you are disposing of the BTC

spending crypto, e.g. buying a gift card

If you didn't receive a dollar amount, such as when selling for USD, then you would use the fair market value of the crypto at the time. This might be how much it was worth, or the value of the item you are acquiring. For example, if you buy a $100 gift card, then the fair market value of the BTC you are spending is $100.

It also doesn't matter if you traded and never withdrew the USD to your bank, or received crypto to your own wallet. If the account is under your control and you would have access to the received funds, then it needs to be declared. It also doesn't matter if it is a US or foreign exchange. For US taxpayers, all activity must be included.

2. Long-term gains have discounted tax rates

If you sell or spend your crypto that was owned for more than a year, it can be classed as long-term and any gains made will have discounted tax rates. The rate depends on your other income, but can be 15% or even 0% for lower income taxpayers. There is a 20% rate for high income earners.

You will need to keep records in case you are even asked to prove you owned them for longer than a year.

3. Losses can be offset against income to reduce taxes

To calculate your total capital gains, your short-term gains and losses are combined. Then any long-term gains and losses are combined. Finally, these totals are combined into a net gain or loss.

If you have a net loss, you can use it to deduct up to $3,000 against your normal taxable income, for example, saving $720 in taxes with a 24% tax rate.

Any remaining losses are carried forward to next year. They can again be used to reduce capital gains from that year as well as another $3,000 against income. This continues forever until you have used up all the losses.

4. Like-kind exchanges

Trading between cryptocurrencies is a tax event and you cannot use a 1031 like-kind exchange.

No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

While some people reported using like-kind exchanges for 2017 and earlier, it definitely cannot be used for this tax year and onward.

5. Record forks, splits and airdrops

Any crypto you receive is treated as income on the day it was received. The dollar value is its fair price or market value.

While some crypto may have an established price, often, there is no market or known price. In this case, you should still add the crypto as Income, but for zero value.

This is needed for when they are eventually sold or traded, as you will use the date and amount from when they were acquired to work out the appropriate gains.

6. Being paid in cryptocurrency should be reported as if you received dollars

If you are paid with crypto, you should report the income as if you were paid in dollars. If you were paid by an employer, it is likely the figures have already been included in your W2 and there is nothing else you need to do.

But if you received crypto from self-employed, or other work, then you need to report the fair value as your income. For example, if you did some work that you would normally have been paid $1,000, but instead you received crypto, then you report $1,000 as income in your taxes. If you just received some crypto with no equivalent dollar value, then you must use the fair or market price of those crypto on the day you received them.

7. Tips/gifts aren't taxable

If you were tipped, as long as it was not for any provided product or service (i.e. you didn't earn it), then it is gift and does not need to reported and is not due income taxes.

However, if you were tipped or gifted crypto that you subsequently sell or trade, you will incur capital gains.

If you were given the cost basis along with those gifts, you can use this information to reduce any gains when you come to sell them. However, you cannot take losses from the basis of these coins, but instead have to use the market value on the date you received the gift.

8. Transfers do not have to be reported (but fees might)

When you transfer any crypto between various wallets or exchange accounts that you own, you do not need to report or pay any tax on those amounts.

However, you might need to report any fees associated with the transfer, either mining or withdrawal fees. These are disposals, where you are paying for a service, and so should be included as Spending even though the tax amount is likely negligible.

If you were transferring your crypto to an exchange to sell, you could add this to its basis, or deduct it from the proceeds you receive.

Any fees included for spending from a wallet should be included as part of the fair market value. For example, if you are spending 0.01 BTC on something worth $36 but have to include a mining 0.001 fee, you should record this as spending 0.011 BTC for $36.

9. Identify lost, stolen or fraudulent activity

Prior to 2018, stolen property could be claimed as a deduction by reporting it as a casualty loss (subject to certain amounts). This deduction has been removed and now is only available for presidential declared disasters.

While lost crypto could never have been claimed, as accidents or negligence are not tax deduction, losing crypto because of fraudulent activity could instead be seen as a capital loss. For example, if the crypto had become worthless or you are no longer able to access it.

Each situation is different and you should check with your tax professional to decide how to report any lost crypto due to fraudulent activity.

10. Keep records

You should keep records of all your crypto activity in case you are ever audited or required to show documentation relating to your tax returns. For example, you might be required to prove the long-term gains you declared were owned for more than a year.

The burden is always on you to keep documentation and perform record-keeping.

Recently, we have seen exchanges go offline and users have no access to their historical records, or even funds. You should access your accounts and download your data as frequently as needed.

Keep records of all your cryptocurrency activity.

Periodically download your trading history from any exchanges you use.

Export transaction logs from any wallets you have.

Ensure you have records for each time you spend any crypto.

This post is for informational purposes only and not intended as tax or financial advice. Please speak with your own tax professional on how you should treat the taxation of your own cryptocurrencies given you own circumstances.

Bitcoin.Tax is the leading capital gains and income tax calculator for Bitcoin and cryptocurrencies. You can sign up for free at https://bitcoin.tax/signup.

Importing your capital gains

Including your cryptocurrency capital gains information into your tax forms has been quite difficult due to the basic support from the major online tax preparation services.

Also, the current IRS forms are not really designed for cryptocurrency users that have to report every tax event. The standard Form 8949 only allows for 14 lines per page, but trading on multiple exchanges can easily generate many more lines because of how lots are split and cost bases determined.

A trader could end up with a 5,000 page PDF to print!

Fortunately, IRS Form 8949 instructions do allow for printing your own condensed version, but this could still result in a 800+ page file that must be printed and mailed to the IRS.

While Intuit's desktop/CD version of TurboTax has limited import support for the TXF file format, it has not been available for users of the web-based TurboTax Online versions until now.

Importing into TurboTax Online from Bitcoin.Tax

Filing your 2018 taxes has just become much easier with the addition of a new TurboTax Online download report file. BitcoinTaxes and the TurboTax Online team have created a file format that can be exported from your Bitcoin.Tax account and imported directly into the TurboTax website.

This means you can use the power of Bitcoin.Tax to calculate your crypto capital gains along with the convenience of TurboTax to prepare and file your taxes.

Just use Bitcoin.Tax tax as normal, go to the Reports tab and click the Download button. The new option for "TurboTax Online" will download the file you need.

TurboTax Online has a new Cryptocurrency section:

click Federal in the menu on the left

choose Income & Expenses at the top

scroll down into All Income and clicking the Investment Income section

click the Start or Revisit button next to the new Cryptocurrency option

Importing more than 250 entries

If you have more than 250 entries in your capital gains report, you can either try and reduce the number of lines, aggregate the values or create an attachable statement.

If you click the "What do I do if I have more than 250 transactions?" in TurboTax Online, you are advised to use a service like Bitcoin.Tax and just enter the sum values of your short-term and long-term gains/losses.

You can get these values in Bitcoin.Tax by clicking the Options buttons in the Reports tab, and choosing "group by short/long term".

This will change the table to show one or two lines, one for your total short-term gains and one for your long-term gains.

You can go back to TurboTax and click "I'll enter them myself" then enter the values manually. Or, you can use Bitcoin.Tax and download the TurboTax Online file again, which will now just be those one or two lines, then import it into TurboTax using the Bitcoin.Tax icon.

You may still need to send the IRS all your Sales of Assets entries, as you are supposed to report each and every tax event. Please check with your own tax professional if you need to do this. If so, you can continue and create an attachable statement.

Form 8949 Attachable Statement

The IRS Form 8949 Instructions (page 3 Exception 2) provides details on how to create an attachable statement.

To do this, enter a single line on Form 8949 summarizing each of your short and long term capital gains, and then send the IRS the full details by mail.

To enter a summary line in Form 8949:

Enter "See attached statement" for column (a)

Leave the date columns, (b) and (c), blank

Fill in the total proceeds, cost and gain in columns (d), (e) and (h)

Enter "M" in column (f)

Back in Bitcoin.Tax, go to the Reports tab and click the Download button and choose "Form 8949 Statement". This will download a CSV with all your entries.

Print this off on paper and then download and complete Form 8453, ticking the entry at the bottom for "Form 8949".

Put these together and mail to the IRS at the address shown at the bottom of the form.

Bitcoin.Tax is the leading capital gains and income tax calculator for Bitcoin and cryptocurrencies. You can sign up for free at https://bitcoin.tax/signup.

BitcoinTaxes does not provide financial, tax planning or tax advice. Please speak to your own tax expert, CPA or tax attorney on how you should treat taxation of digital currencies.

Visit http://turbotax.intuit.com/lp/yoy/guarantees.jsp for TurboTax product guarantees and other important information. Limited time offer for TurboTax 2018. Discount applies to TurboTax federal products only. Terms, conditions, features, availability, pricing, fees, service and support options subject to change without notice. Intuit, TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries.

The latest release of BitcoinTaxes now supports this policy and is available to our UK users.

Capital Gains Tax (CGT)

HMRC does not consider cryptocurrencies to be money and they are still subject to capital gains. While they are split into three types of tokens: exchange, utility and security, the tax treatment depends more on their use rather than the type.

In the vast majority of cases, individuals hold cryptoassets as a personal investment, usually for capital appreciation in its value or to make particular purchases. They will be liable to pay Capital Gains Tax when they dispose of their cryptoassets.

Most users will calculate the capital gains or losses from their trading.

Only in exceptional circumstances, with an individual with high volume trading, would it be considered subject to Income Tax rather than CGT. This might well be the case for businesses that operate a trading system and HMRC says they will come out with guidance for business in due course.

HMRC also considers cryptocurrencies to be intangible since they are digital. This means that one Bitcoin, for example, is treated no different than another, and therefore costs can be pooled together to create an average cost.

When the crypto is disposed, i.e. when you no longer own it, a tax event is seen to have occurred. This could be from

selling it for GBP, or other fiat currency

trading one crypto for another

spending crypto for goods and services

donating to charity

giving your crypto to another person

A tax event from a disposal will trigger a capital gains calculation, where you need to work out if the event had a profit or loss.

In the case of giving away crypto, it must be considered a disposal at fair market value in GBP. While no rules are in place for how to work out the value, using a common and consistent method would likely be the best approach.

Donations to charity are not subject to CGT, unless the donation is tainted or if the disposal to charity is valued higher than the cost of acquisition, resulting in a realised gain.

Costs, such as the acquisition cost or fees, can be used to reduce the amount of gains received. However, costs used as part of Income profits or expenses, such as mining equipment, cannot be deducted.

Cost Basis Calculations - Pooling

Since crypto assets are intangible, pooling is used to calculate the cost basis of an asset when it is disposed. This is essentially averaging your crypto with their acquisition costs.

Pooling with Bitcoin.Tax

Bitcoin.Tax has updated all tax years with these new UK rules. The old calculation methods, such as FIFO, LIFO, averaging, etc., are still in place but we recommend you update your calculation methods selections where appropriate.

To calculate using the Pooling method, go to the Calculate tab in Bitcoin.Tax and select the new "Pooling with same-day and 30-day rule" option. You can select each crypto asset individually or click the Set Method button and choose the option for all your crypto assets.

Changing the option will start a new calculation. Or, if you see "recalculate" next to the Pooling option, please click the Recalculate button.

Once this is updated you should not need to change it again.

Bitcoin.Tax will now calculate using average pooling.

The same-day rule means that any acquisitions made on the same day of a disposal will be pooled separately and used first.

If the same-day rule is not used, then the 30-day rule means that any acquisitions made in the 30 days following a disposal will be used instead of the average pool.

Please be aware that this means we could incorporate income and purchases of cryptocurrencies from the following tax year into your calculations. Therefore, it is important that you navigate to the following year and import any relevant trading and income data before calculating your capital gains - at least the first 30 days worth of data from the following year. You can then go back to the previous year and recalculate.

If there are 30-day acquisitions used from the following year, they will be carried forward and displayed in the Opening tab of that year so they are not reused.

When you are finished, you can see the total capital gains amount shown in the table at the top of the Calculate tab.

We display the capital gains amount and the estimated taxes on that amount.

Please note that we do not take away the standard deduction (£11,300 for 2017/2018) as we do not know what other gains you might have. If crypto is your only source of capital gains, and you are under this allowance, then you may not need to report this information. However, we strongly recommend you still go to the Reports tab and download the CSV of your data in case you need to show this is the future.

Bitcoin.Tax is the leading capital gains and income tax calculator for Bitcoin and cryptocurrencies. You can sign up for free at https://bitcoin.tax/signup.

BitcoinTaxes does not provide financial, tax planning or tax advice. Please speak to your own tax expert, CPA or tax attorney on how you should treat taxation of digital currencies.

If you are new to Bitcoin.Tax, or are just looking for a refresher, the 7 steps below will show you how easy it is to use the software. Please note that several of the steps are optional, and they are listed accordingly.

Step 1 - Check Tax year

Look in the top left and make sure the correct tax year is selected. The tax year should be the year you are doing taxes for. For example if it is 2018, but you are doing taxes for 2017, the tax year should be set to 2017.

Step 2 - Import Your Trades (Buys & Sells)

The Trading Tab is where you'll import the majority of your data. Make sure you are on the correct tab, and scroll down to the Add Trades section. Once there you can find import instructions for a number of supported exchanges by clicking on the expand plus sign (1) next to the exchange's name, or you can manually (2) import trades.

Remember to import all trades from all exchanges you used during the tax year, even if you only did a minimal amount of trading on the exchange.

You can read more about the Trading Tab and importing trade.

Step 3 - (Optional) Import Income Data

The Income Tab is for cryptocurrency that was received as income, mined, or gifted. If you have this type of data, you will need to complete this step. If none of that happened, then you can move on to the next step.

Make sure you are on the Income Tab, and then scroll down. You can manually add income, or follow the instructions provided to import it automatically.

Remember the Income Tab is for all cryptocurrency income you received outside of trading. This includes being paid in crypto, mining crypto, and being gifted crypto. More information about Cryptocurrency Income can be found on our FAQ page.

Step 4 - Import Spending Data (optional)

The Spending Tab is for cryptocurrency that was used to buy an item, pay for services rendered, or donated/gifted. It is also where you will enter any crypto that was lost or stolen. If you have this type of data, you will need to complete this step. If none of that happened, then you can move on to the next step.

Make sure you are on the Spending Tab, and then scroll down. You can manually add spending, or follow the instructions provided to import it automatically.

Remember the Spending Tab is for cryptocurrency spending outside of trading. This includes using crypto to buy an item, pay for services rendered, donating or gifting someone crypto, or losing/having your crypto stolen. More information about cryptocurrency spending can be found on our FAQ page.

The Opening Tab is used if you started off the tax year with cryptocurrency from previous years. If you have crypto from a previous year, you will need to complete this step. If you've entered this data into previous years of BitcoinTaxes, it will be automatically imported into your Opening Tab. If you did not have crypto from a previous year, then you can move on to the next step.

Make sure you are on the Opening tab, and then scroll down. You can manually add your previous years' cryptocurrency data or follow the provided instructions to import it automatically.

Remember the Opening Tab is for any cryptocurrency you still hold from previous years. For example if you are doing taxes for 2017, but had purchased some crypto in 2016, you would want to add the crypto from 2016 into the Opening Tab.

Step 6 - Calculate Your Gains/Losses

The Calculate Tab is where you will calculate your cryptocurrency capital gains and losses. You can simply hit the Calculate button, and a summary of your short-term gains, long-term gains, and estimated taxes will be displayed.

Step 7 - Download Your Reports

The Reports & Export Tab is where you will download your reports. On the Reports and Export Tab you can click the drop down arrow on the Download button. This will provide various file format options (e.g., .CSV or .TXF) to export your data. You can use the provided files to import directly into a supported tax software, or to provide to your tax professional.

Bitcoin.Tax is the leading capital gains and income tax calculator for Bitcoin and crypto-currencies. You can sign up for free at https://bitcoin.tax/signup.

This post is the opinion of the author and is not financial, tax planning or tax advice. Please speak to your own tax expert, CPA or tax attorney on how you should treat taxation of digital currencies.

2018 has been an interesting year for crypto-currency markets. Starting with record highs in January, we have seen a steady decline throughout the year to a point where prices are back to the levels of 13 months ago (~$4,800 on 10th Oct 2017)

While 2017 saw records gains in many portfolios, 2018 is likely to see record losses.

As an investor, speculator or HODLer, decisions must be made if you are going to sell.

As we come toward the end of the tax year, you might consider selling some of your crypto holdings to claim losses and give yourself a tax deduction.

Tax Loss Harvesting

Selling assets at a loss can be a useful tax planning strategy. The losses that have been accumulating throughout the year can be realized to offset against other gains and income, to reduce tax liability.

With stocks and shares, you would need to plan this carefully because of the wash sale rule that disallows losses from any sale within 30 days before and after an acquisition of the identical stock. You would have to sell now and hope it doesn't go up too much in December.

However, since Bitcoin and other crypto-currencies have been categorized as property by the IRS (Notice 2014-21) then these rules likely do not apply.

Economic Substance

Before you act, you need to consider one other issue.

Tax experts point to the Economic Substance Doctrine, IRC Section 7701(o), that disallows tax benefits of a transaction if that transaction lacks any economic substance, or is not for a valid business purpose.

A transaction has economic substance if a) it has meaningful changes (apart from tax) in the taxpayer's economic position and b) there is a substantial purpose for making the transaction. Failing these tests could render the transaction invalid for tax purposes, disallowing your losses, and could even impose penalties on any tax underpayments.

So the question becomes does selling crypto create meaningful changes and is there a substantial purpose? And what does that entail?

There is a tried and true principle of the Economic Substance Doctrine under which a transaction has "economic substance" if it exposes the parties to "market risk."

Meaning that letting your portfolio be subject to unknown market forces should be enough to ensure that the sell and subsequent re-purchase would not fail the doctrine. As for how long your should wait, Cross continues,

Two or three days is probably the shortest amount of time I would recommend, with a week or more being the safest choice for those who want to eliminate the risk of the economic substance doctrine almost entirely.

You should review your portfolio and determine if you want to take advantage of any losses to reduce your tax burden, and if so, that you can do it in a way that would be considered to have economic substance.

Long-Term Capital Gains

Also consider that selling now could reduce any benefits from potential long-term gains you might receive next year. Tax rates for long-term gains, which are assets held for more than a year, are substantially discounted at 0% (up to $38,600 as a single-filer), 15% (up to $425,800) and 20% (everything else). This means you need to consider any difference between the potential long-term gain taxes alongside the tax reduction this year. If prices rise next year, it might be better to wait.

Tax Deduction

Tax losses can also be used to offset other capital gains you might have. For example, if you have gains from stocks or shares over the year. Your long-term losses reduce your long-term gains, short-term losses reduce short-term gains, and then the net long-term gain or loss is applied against the net short-term gain or loss.

If there are more losses than gains, these can be included in your tax return as a tax deduction, up to the value of $3,000. Any remaining losses can be carried forward to the next tax year to reduce future gains or income. This continues until all the losses are used.

Let's look at an example.

Say you own 1 BTC that was purchased back in January at $10,000. If you sold it for $4,800, you would have a short-term capital loss of $5,200. You could then buy it back, perhaps at the same price of $4,800 so you own 1 BTC again.

You can declare the $5,200 capital loss in 1040 Schedule D.

Let's say you also had $1,000 of short-term capital gains from the stock market. Your gains and losses are combined so you total capital gains is now $0 and you don't have any capital gains taxes. You still have $4,200 capital losses.

You can also deduct $3,000 of that against your earned income, further reducing your tax liability. The remaining $1,200 in losses are carried forward into 2019 to reduce future gains or income.

Summary

Crypto-currencies are not currently subject to wash sale rules

Review any re-purchases of crypto to ensure you are not failing the economic substance doctrine

Be aware you could still incur some costs from the difference in buy and sell prices as well as trading fees

Reduce taxable income by up to $3,000 per tax year with excess capital losses, with any remainder carrying forward to future years

Tax loss selling will be reset and reduce the cost basis of your assets so selling the following year could result in increased short-term capital gains

Bitcoin.Tax is the leading capital gains and income tax calculator for Bitcoin and crypto-currencies. You can sign up for free at https://bitcoin.tax/signup.

This post is the opinion of the author and is not financial, tax planning or tax advice. Please speak to your own tax expert, CPA or tax attorney on how you should treat taxation of digital currencies.

Cryptocurrencies like Bitcoin, Litecoin, and Ethereum have been slowly changing the face of finance for some time now. Until recently, however, those transformations had largely flown under the radar.

Until the recent explosion in the price of cryptocurrencies brought flood new investors to the marketplace, the world of Bitcoin, Litecoin and other alternative forms of payment was largely restricted to a small army of tech enthusiasts. Some of those early adopters were programmers, drawn by the potential of the blockchain. Others were attracted to the anonymity of cryptocurrency transactions, while still, others found the concept behind these unique forms of payment were a good fit for their libertarian philosophies.

No matter what the attraction, those early adopters saw something many others had missed. And while the earliest cryptocurrency transactions were small – one of the earliest uses of Bitcoin was the purchase of a pizza, other, larger, purchases soon followed.

By the time the first run-up in Bitcoin prices was complete, all kinds of consumer products, from electronics to automobiles, had been made in Bitcoin, Litecoin and other virtual forms of payment. It was only a matter of time, therefore, until the first house was bought with virtual cash instead of U.S. dollars. So what is the future of cryptocurrency, and what impact will it have on the real estate industry?

What Are the Most Important Cryptocurrencies in the Modern Real Estate Market?

Already several houses, including luxury properties in the United Kingdom and a million dollar home in the United States, have been purchased using cryptocurrencies, and many more houses will follow suit. Modern sellers know that they need to keep their options open, and they understand that young buyers are increasingly looking to cryptocurrency as not only a store of value but a way to diversify their holdings into real estate.

And while many types of cryptocurrency could conceivably be used for real estate purchases, long-established entries like Bitcoin and Litecoin are almost sure to lead the way. These virtual currencies have been around much longer than their newer rivals, and they have proven themselves in all kinds of market conditions. That makes Bitcoin and Litecoin good choices for real estate investors and home buyers alike.

The Future of Cryptocurrency for Real Estate Purchases

While the future of Bitcoin and other cryptocurrencies is still being written, there is reason to believe that real estate transactions will continue to be conducted in this new form of payment. After putting off home buying for a number of years, many members of the millennial generation are now settling down, starting families and buying homes. Those young buyers are much more comfortable with cryptocurrencies than their parents, and that bodes well for the future of real estate transactions on the blockchain.

A lot will depend, of course, on the price stability of Bitcoin, Litecoin, and their newer rivals. Up to now, the volatility of the cryptocurrency market has kept many investors, and many real estate buyers, on the sidelines. If some expert predictions come true and the market settles down, that could open a new wave of real estate transactions fueled by cryptocurrencies.

The growing number of so-called Bitcoin millionaires also bodes well for the future of blockchain enabled real estate purchases. Those Bitcoin profits may look great on paper, but investors are smart enough to know that keeping all their eggs in one basket is generally a bad idea.

Already many of those Bitcoin millionaires are choosing real estate as a way to diversify their holdings and reduce their future risk. Some of those early Bitcoin and Litecoin adopters are using their virtual stashes to purchase their own homes, while others are branching out into rental properties and other types of real estate investments. If their experiences prove to be positive ones, it could open the floodgates for other investors, and pave the way for a new wave of real estate speculation.

Buying a House with Cryptocurrency – Exploring the Pros and Cons

With so much interest in cryptocurrency and real estate, there are sure to be lots of people looking at buying a home this way. So what are the pros and cons of purchasing a home with cryptocurrency, and what can buyers expect when they enter this new market?

There are a number of potential advantages to buying a home with Bitcoin, Litecoin and other forms of cryptocurrency, including:

The chance to diversify – Buying real estate is a great way for those with cryptocurrency profits to diversify their holdings.

Locked in profits – For those who have held Bitcoin for some time, buying a house can be an excellent way to lock in profits.

More negotiating power – Cash buyers always have an edge in real estate transactions, and the fact that the cash is virtual does not change that equation.

Of course, there are some potential drawbacks to buying a home with cryptocurrency. Here are some of the roadblocks potential Bitcoin buyers might encounter.

Limited availability – While the number of cryptocurrency real estate transactions is on the rise, the number of sellers accepting this unique form of payment is still relatively small

Missing out on future appreciation – If the past is any indication, cryptocurrencies like Bitcoin and Litecoin could appreciate far faster than houses and apartment buildings. Buyers who turn their virtual coins into real estate could miss out on the future appreciation of the asset.

Tax implications – The laws governing cryptocurrency and blockchain transactions are quite complicated, and real estate buyers will need to be prepared for that. Buyers should seek out a CPA or tax expert with a deep understanding of the cryptocurrency market and the tax implications.

Selling a House for Cryptocurrency – Advantages and Drawbacks

The advantages and drawbacks of selling a home for cryptocurrency are similar, but the risks are a bit different. Here are some of the potential benefits of selling real estate on the cryptocurrency market.

Potential for appreciation – If you sell your home for dollars, you have a pretty good idea how much the account will be worth. With cryptocurrency, however, your account could grow much faster, giving you a big boost in the future.

A wider audience – The more buyers interested in a piece of real estate, the better. Opening up the sale to cryptocurrency buyers could help your home sell faster and for more money.

There are some potential pitfalls to selling your home for virtual currency. Here are some drawbacks to consider.

A complicated tax situation – the same tax complications exist on the seller side of the ledger. If you sell your real estate for cryptocurrency, you will need to deal with a complicated tax situation.

Potential losses – The cryptocurrency market has been extremely volatile, and if you sell at the wrong time, you could lock in losses or limit your profit potential.

The difficulties of storing your virtual cash – If you do not already have an account on one of the Bitcoin or Litecoin exchanges, you will need to create one, or make arrangements for another type of storage. This can be complicated, and if you make a mistake, you could lose access to your stash of virtual coins.

Blockchain Technology and the Future of Real Estate

Whether you buy your next home with Bitcoin or just sit on the sidelines, one thing is already quite apparent – blockchain is changing the face of the real estate market, and those changes will only accelerate in the future. The inherent security and transparency of blockchain transactions has a transformative power, one not seen since the creation of personal property.

Blockchain transactions, for instance, have the power to transform how real estate ownership is authenticated. Once completed, a blockchain transaction is there forever, and that could simplify real estate titles and make purchases more secure.

The adoption of Bitcoin, Litecoin and other cryptocurrencies by governments should speed its acceptance in real estate transactions. This transformation is already underway, and as governments get more comfortable with blockchain technology, adoption rates could rise even further.

It is also important to note that blockchain technology is here to stay, no matter what ultimately happens to Bitcoin, Litecoin and other cryptocurrencies. While blockchain technology makes cryptocurrency transactions possible, it is larger than any one virtual coin. That bodes well for the real estate market – for buyers and sellers alike.

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. You can try Bitcoin.Tax at https://bitcoin.tax/signup.

We are pleased to announce the new feature that allows users to give access to their accountants or other third-parties.

Accountants that use our business plans are already able to request the view of their clients's data. The client can then accept or deny the request and the accountant is able to switch into the client's data as often as needed.

Now all users will be able to see and control their accountant’s access from the Access tab inside their Account page.

Inviting your Accountant

From the Access tab, just click the Invite button and enter the email address of your accountant. They will receive an email and will be able to access your account remotely.

You will always be able to see everyone who has access and remove them at any time.

Accountant's View

For accountants that do not have a Bitcoin.Tax business plan, you will also be able to view your client's data.

You will receive an email containing a special link that you can use to view your client's account. The email will also contain an one-time access code value for 15 minutes. However, you can simply request another code as required using the link in the original email.

If you would like to have greater control and the ability to change, upload or calculate client data, our business plans offer unlimited managed accounts and full access to shared client accounts.

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. CPAs, accountants and tax professionals can try Bitcoin.Tax at https://bitcoin.tax/business. Individuals and traders can try Bitcoin.Tax at https://bitcoin.tax/signup.

Bitcoin.Tax can export your capital gains records into multiple formats, including a "TXF" file for importing into TurboTax®.

The online/web version of TurboTax does not support file importing. You must use their downloadable or CD version.

We are going to go through the steps to import your file.

Once your have finished calculating your data, go to the "Reports & Export" tab, click the Download button and select the TurboTax option.

Open TurboTax for your current tax return. Although capital gains are added into the Personal Income -> Investment Income -> Stocks, Mutual Funds, Bonds, Other section, you don't actually have to be there to import your file.

Click the File menu at the top, choose Import, and then "From Accounting Software".

On the next screen, select "Other Financial Software (TXF file)" and click Continue.

Next, click "Browse Files..." to find and choose the ".txf" file you downloaded from Bitcoin.Tax. That will be loaded into TurboTax and you can click "Import Now".

It should show as 1099-B. You can click the "view details" link to check what the file contains, otherwise, just go ahead and click "Import Now".

Just click Done on the next screen.

If you now go to PERSONAL at the top, then into Personal Income, and scroll down to the Investment Income, you will see the entries have been added.

You can click the Start button (or Update if you've been there already) next to the Stocks, Mutual Funds, Bonds, Other, which will show you the details.

You will notice that "Needs info?" says YES. This is because there is no Institution Name set for the data, which is expected. You can ignore this.

You can click the Edit button next to the line and see all the records.

Click Done to get back.

You are finished and your data has been imported.

If you want to verify the information has been included in your Schedule D, click on the "Forms" at the top right of TurboTax. You will then see both the Schedule D and 8949 forms. Select each to check the details have been included.

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. You can try Bitcoin.Tax at https://bitcoin.tax/signup.

This post is the opinion of the author and not financial or tax advice. Please speak to your own expert, CPA or tax attorney on how you should treat taxation of digital currencies. A list of Bitcoin and digital-currency knowledgeable accountants can be found at https://bitcoin.tax/cpa.

]]>https://bitcoin.tax/blog/1099k-tax-coinbase-gdax-gemini-bitcoin/051ef40e-91b4-4915-91ac-ca848a9e6354Thu, 01 Feb 2018 18:49:23 GMTIt is pretty normal for online services that accept payments for trades or business, such as PayPal or Stripe, to send out a 1099-K. This details the gross income received through their payments system on behalf of the business.

This would be included as part of the gross income in reported tax forms. Although the business then also reports business costs and expenses to calculate the net income to make up taxable income, for which they ultimately pay taxes.

Coinbase also sends 1099-K for their merchant accounts if they received payments in BTC (or immediately converted to USD) over the 200 transactions or $20,000 thresholds.

What's surprising a number of people this year is that Coinbase, GDAX, Gemini, and perhaps other exchanges, are also sending a 1099-K where the number of trades on their exchange platform exceeds these thresholds. Essentially, if you made more than 200 trades or the total amount traded was over $20,000.

This form is sent to the individual and also the IRS.

But since the 1099-K only includes trade sales, the gross amounts can be in the hundreds of thousands, or millions. This is understandably causing some internet flutters and people commenting, "Do I have to pay taxes on that?" or "I don't have that much!".

Firstly, you should verify that the figure is correct. Some users on reddit are reporting they had no where near the threshold amounts. If so, Coinbase's 1099-K information page has details on how you should contact them.

You should also pass this form over to your own tax professional for correct advice on how you should report this information.

For businesses, this total value would normally be included in their tax forms. For example, a self-employed taxpayer would include this as part of their declared Gross receipts or sales on Line 1 of their Schedule C.

However, for most individuals, this is just an indication of the proceeds they have received from their trading. And since all trades must be reported as part of their capital gains reporting in Schedule D, this figure is going to be included within the total proceeds of sales of assets totaled in column (d) of Form 8949 and Schedule D.

What could therefore cause a flag with the IRS is if you report less proceeds than was reported on all your 1099-K forms, since it could indicate you have not reported all your trading.

Be sure to collect all your trading activity so you can calculate and report your trading proceeds, costs and gains.

If you need some tax advice or help with filing in your tax forms, you can contact our partners at CryptoTaxPrep that provide a complete tax preparation service backed with the power of the Bitcoin.Tax system.

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. You can try Bitcoin.Tax at https://bitcoin.tax/signup.

This post is the opinion of the author and not financial or tax advice. Please speak to your own expert, CPA or tax attorney on how you should treat taxation of digital currencies. A list of Bitcoin and digital-currency knowledgeable accountants can be found at https://bitcoin.tax/cpa.

Many are comfortable with importing their data, calculating results, and creating their tax reports. However, as many are also looking for help and guidance, tax advice, and information on how best to report.

Bitcoin.Tax do list accountants, CPAs and tax attorneys who are familiar in these areas. Still, finding an accountant who has experience and knows crypto in-depth can be a challenge. Even harder to find one who isn't just overwhelmed themselves and can just take it all off your hands.

Bitcoin.Tax is therefore very pleased to announce our partnership with Crypto Tax Prep by HappyTax. A full tax preparation service with CPAs that know crypto.

Crypto Tax Prep is the national leader in professional Crypto tax preparation and have been featured on Product Hunt, Accounting Today, Franchise Times and in Entrepreneur Magazine. For more information, or to contact a CPA that can help prepare your taxes, go to:

Colin Mackie, founder of Bitcoin.Tax, explained how this partnership will help users. "People using crypto are looking for someone to do their taxes and often really just don't know who to talk with. Now there is access to a specialized service, with a real CPA, using the power of the Bitcoin.Tax service."

An AMA will also be announced shortly. Crypto Tax Prep's founder and CEO, Mario Costanz, says, "we are joining together with Bitcoin.Tax to bring an exclusive Crypto AMA to discuss all things crypto-currency, tax regulations, and what every informed investor needs to know."

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. You can try Bitcoin.Tax at https://bitcoin.tax/signup.

CryptoTaxPrep is the trusted source for crypto-currency tax advice, preparation and accounting. You can find them at cryptotaxprep.com.

]]>https://bitcoin.tax/blog/bitcoin-tax-update-quick-like-kind/0da60f23-4efa-4032-a9e7-c51183a1deddTue, 09 Jan 2018 00:00:00 GMTToday we upgraded Bitcoin.Tax. We also migrated over to some new hardware, which unfortuately did mean the servers were offline for several hours last night, but back this morning.

There have been a few additional teething issues today that have caused a couple of outages and errors. Our apologies for any inconvenience. Please contact our support team if you are still seeing issues so we can investigate.

Calculation Improvements

One of the main improvements is the speed of handling larger volumes. This is being rolled out in phases and starts with the calculation engine itself. This is the part responsible for working out the gains for trades and matching costs basis across the various methods.

As the number of trades (all your opening, trades, income and spending) increases, along with the number of different coins traded, so the time taken to work these out increases. With users now commonly having tens of thousands of trades, this could be slow and was putting a strain on the system, causing it to be generally slower for everyone.

We've done a number of things to work toward impoving this situation, not only the optimization of the calculation engine but also to move high-volume accounts to specialized servers. This allows them to have longer-running tasks done efficiently as well as not overloading the main users.

The huge increase in users over the last year has also meant the need to upgrade our infrastructure. Harware and people. To support this we have also changed our plans where those heavier users pay more. There are now tiered plans from 1,000 to 100,000 trades.

We know (and have) users above that, so while we are working Stage 2 of our volume rollout, we are also working on dedicated plans for really high volume users to handle their needs better.

Lastly, we have offered a free-tier since 2013 and the majority of our active users utilize this. We are glad we could offer such a valuable service to the community over the years, but it has reached the point where the resources required to support this have become too costly.

The free tier has been reduced to 20 trades for 2017 onwards (this was unintentially being applied to 2016 too, but is being corrected). The 8949 and tax package downloads have also been moved into the first Premium tier.

We hope this will allow us to grow the infrastructre adequately in order to support everyone's needs in the future.

1031 like-kind exchange and Form 8824

Even though the Trump tax plan for 2018 has removed the ambiguity of whether digital currencies can make use of a 1031 like-kind exchange, we are still able to calculate those deferred gains for past years and provide an 8824 downloadable statement.

We use an attachable statement (much like the 8949 statement) since each trade would otherwise require one form and a single sheet of paper. This is likely going to kill a few forests, so following the opinion of tax experts, we instead produce the statement that can be condensed and printed in a much smaller size.

2FA / Two-factor Authentication

The most voted item on our suggestions list has, since the beginning, been adding 2FA.

We are happy to announce that is now live allowing you to secure your account.

Please go to the bottom of your Account tab, entering your current password to begin adding 2FA to your account. We use standard HTOP so you can use any mobile app authenticator, such as Google Authenticator, Authenticator+ or Authy.

Closing Prices

Bitcoin.Tax had originally been used more of a pre-tax preparation tool and so our prices were updated less frequently. Daily for the major digital currencies and weekly (getting the last 7 day prices) for lesser used coins.

With recent large fluctuations, delayed prices in the Closing Report make is seem out of date and inaccurate.

We have taken on your feedback and now keep live prices for many currencies from a selection of sources to display with the current year's closing report. This should give a much more accurate picture of your remaining holdings.

Professional Edition

Our tax professional edition has grown in usage over the year and now supports unlimited clients, either as managed accounts or accounting linking. An existing Bitcoin.Tax user can share their trade data with a tax professional (fully or ready-only) with mutual consent.

We are also working on allowing tax professionals to create user accounts giving their clients full access as if they were using Bitcoin.Tax themselves.

Tax Advice

We wish we could offer our users the tax advice they need. Unfortunately, as a software provider, we just aren't authorized to give tax or financial advice. Despite this, we have built a list of self-registered CPAs and accountants over the years, that proclaim their knowledge in handling digital currencies. However, we know most of them are now extremely busy with the number of contacts they have received.

So we still want a way to be able to offer a scalable tax advice and preparation plaform...

....I think some good news is coming.

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. You can try Bitcoin.Tax at https://bitcoin.tax/signup.

This post is the opinion of the author and not financial or tax advice. Please speak to your own expert, CPA or tax attorney on how you should treat taxation of digital currencies. A list of Bitcoin and digital-currency knowledgeable accountants can be found at https://bitcoin.tax/cpa.

On 1st August 2017, a new Bitcoin fork was created called Bitcoin Cash.

Starting from block 478558, the Bitcoin blockchain split to be the Bitcoin (BTC) and the Bitcoin Cash (BCH) forks.

Anyone who held BTC before the fork are able to receive the equivalent amounts of BCH. BCH can now be traded on many exchanges, including Kraken, Bitfinex, Bittrex, ViaBTC, OKCoin and more. Coinbase initially stated they would not support the BCH fork, however, recently changed their mind and now expect to support it from 1st January 2018.

This is a similar situation that happened to the Ethereum fork in July 2016 where ETH forked to become both ETH and ETC (Ethereum Classic).

Tax Implications

There are really no similar traditional financial events for this with regard to taxes. There also has been no additional guidance from the IRS on how this should be treated, so we are left to make a reasonable decision.

What is clear, is that income has been generated. However, the question is when and how much.

The IRS, in their 2014-21 Notice, clarified that mining is to be treated as income on the date the assets are received. The price would be their fair market value, e.g. the price for which they were immediately sold or the daily price of the digital currency.

But what is the price of BCH? It isn't reasonable to say it was anything to do with the price of BTC because they are different markets. However, while there wasn't a consistent open market, it had been trading for weeks before and a price was established.

If you owned 10 BTC in your core wallet, you had access to 10 BCH since you had the private keys. However, many people were unable to access these new coins until their wallet had been updated. They could argue their date of receipt was later. And if you had BTC in Coinbase? You do not yet have access to those 10 BCH, but will do at the begining of next year.

What if you had no interest in BCH but you owned 1,000 BTC. Do you suddenly have a $277,000 income tax bill?

The ETH/ETC split in 2016 was similar, although there was no established price, so another option was to say they had a zero cost basis. This let you record it as income, albeit nothing, but when you come to trade or sell you will take 100% gains. The taxes you pay would be treated as if it had been deferred normal income.

If you hold onto your BCH coins for more than a year, then you will have kept them for investment purposes and so should benefit from the reduced long-term capital gains rates.

FAQ

1. Woo-hoo! Free money!

Yes, BCH is essentially free money because you owned BTC. However, free money is income and income is taxable.

2. Do I need to tell the IRS about my BCH?

You should report the BCH as income for a market value, e.g. Bitcoin.Tax uses a daily price of $277. This also becomes the cost basis. You will report that as income for 2017 and pay the appropriate taxes. When you sell those BCH you can subtract the proceeds from this cost basis, which is your capital gains or losses.

If it is treated as having a zero cost basis, then for now there is nothing to report. However, when you sell or spend your BCH you will take the 100% proceeds as capital gains income that will be taxed. This would be declared as normal as part of your capital gains in 1040 Schedule D.

3. Should it be treated as a split of BTC?

That seems incorrect and complicated. If you half the value of your BTC holdings and sell them, you will incur more gains. However, could you determine how much were short-term and long-term? The BCH would also be classed as income at this point, since it now has a value, and so will incur income taxes. Unlike stocks that split, BCH and BTC are separate digital assets that have no common markets, and will have different values going forward.

4. What should I use as the date of the BCH?

The date you had control. This will often be the date of the fork, 1st August 2017. For instance if you held your coins in your own local wallet, e.g. Bitcoin core or Ledger, then you were in control of the BCH private keys on that date. If you held your BTC in an online exchange, it would be more likely the date they were available to you. With Coinbase, for instance, that will not be until 1st January 2018.

5. Will I pay taxes when I sell my BCH?

Yes, you will pay the appropriate taxes as it will be treated as capital gains income. If you use the zero cost-basis approach and you owned 1 BTC before the fork, you have 1 BTC and 1 BCH after the fork. When you sell your 1 BCH, at $300 for example, then you will need to declare $300 capital gains income. Tax rates depend on your circumstances and other income, but if sold within a year would be your normal tax rate, e.g. 25%. If you held onto the BCH for more than a year, you could claim long-term tax rates, e.g. 15%.

6. How should I enter this into Bitcoin.Tax?

Go to the Income tab for 2017 and manually add a new row for the amount of BCH you now own. This will often be the amount of BTC you held beforehand, but you might want to split it up by wallet or exchange. So, for example, if you had 10 BTC in your Ledger wallet at the time of the fork and checked you have access to those 10 BCH, then you would add 10 BCH income. Bitcoin.Tax will put in the daily price, or if you enter zero "0" as the total value it will set a zero cost-basis and defer the income to when they are sold, spent or traded.

Bitcoin.Tax is the leading capital gains and income tax calculator for Bitcoin and other digital currencies, calculating gains and losses for users since 2013. You can sign up for free at https://bitcoin.tax/signup.

This post is the opinion of the author and not financial or tax advice. Please speak to your own expert, CPA or tax attorney on how you should treat Bitcoin Cash. Our list of Bitcoin and digital-currency knowledgeable experts can be found at https://bitcoin.tax/cpa.

]]>https://bitcoin.tax/blog/taxing-bitcoin-forks-like-kind/f1f4cf7f-999c-43cd-9e28-9f0324e149dbWed, 01 Nov 2017 19:00:00 GMTI had an interesting conversation with Robert Green, CPA, of GreenTraderTax.com last week. We discussed the potential issues around how income will be declared for forks and if like-kind exchanges are valid.

Fork Income

With regard to the last Bitcoin Cash fork in August 2017, Green writes that the Bitcoin Cash fork would be treated as income using the daily value at the time, which was trading at around $266 (Bitcoin.Tax uses $277.20), however, each fork may be treated differently. The previous well-known fork, ETH to ETC, back in July 2016 was treated differently. There was no established price or futures market for ETC before it happened. As previously mentioned by Tyson Cross, tax attorney,

Ethereum Classic had no readily ascertainable value.

So it would be impossible to say what it was worth on that day, which is why zero cost has been used as a cost basis.

The SegWit2x (B2X) fork due this November could be similar to Bitcoin Cash. B2X is trading on various futures markets at HitBTC and Bitfinex for between $951 and $1,153 as at 1st Nov 2017. However, Bitfinex is no longer officially available to US customers and HitBTC is based in Hong Kong. Is there complete dominion to this income? Or will there be come the fork date?

1031 Like-Kind Exchanges

Another topic of discussion was the consideration of 1031 like-kind exchanges. This is something more commonly seen in real estate, where one property can be sold and the proceeds used to purchase another with no capital gains.

However, those properties must meet certain requirements, such as being for business or investment use, and of the same nature, character or class.

In absence of specific guidance from the IRS on the likeness of digital currencies (is BTC like ETH) opinions have been divided. Green's advice to clients is to not use deferred income.

First, Bitcoin does not qualify as like-kind property with another coin. Second, coin-to-coin trades primarily executed on exchanges are not “direct two-party exchanges” or “multi-party exchanges using a qualified intermediary.

Bitcoin.Tax does allow the user to choose like-kind treatment although that is not the default option. This is a feature requested by other tax accountants and also could be applicable for users in other countries. However, if a US tax payer is advised or decides to use 1031 they must also include a 8824 form declaring the deferred gains for each exchange. Clearly, this form is not designed with digital currencies in mind as a 2 page form for every exchange is impractical with thousands of trades. Therefore, rather than provide the PDF form, Bitcoin.Tax instead creates an 8824 downloadable statement.

Bitcoin.Tax is leading capital gains calculator for digital currencies for US and worldwide users, traders and investors. You can try Bitcoin.Tax for free at https://bitcoin.tax/signup.

This post is the opinion of the author and not financial or tax advice. Please speak to your own expert, CPA or tax attorney on how you should treat taxation of digital currencies. Our list of Bitcoin and digital-currency knowledgeable experts can be found at https://bitcoin.tax/cpa.

DASH (previously DRK) could always be used when adding trades, income and spending. Adding or importing mining transactions used DASH/USD and DASH/BTC price lookups for calculating fiat amounts.

With this update DASH has been added into the Address tab, so blockchain transactions can be viewed and assigned as Income or Spending.

DASH is also added as a mining coin in the Income tab. Just type in your payout address and all incoming transactions will be scraped from the blockchain and imported into your Income.

BitcoinTaxes is the best tool for calculating capital gains taxes and income for Bitcoin, DASH, Ethereum and other digital currencies. Click here to get started for free.

]]>https://bitcoin.tax/blog/bitcoin-taxes-common-questions/982f6dfc-58c9-47f5-bf5c-9d1b6bb782feWed, 22 Feb 2017 20:00:00 GMTWe're way into the new tax filing season for 2016 with taxes due by Tuesday, April 18 2017.

2016 saw an increase in the price of BTC from $430 to $1,000. Many people will likely have capital gains this year from selling or spending any coins.

Here are some of the more popular questions and answers that we see each year.

1. Do I need to pay taxes if I never withdrew the USD?

When you are trading Bitcoins or digital currencies on an exchange, each sell order must be included in your capital gains calculations, even if you never withdrew the dollars to your own bank account.

If you received USD, another foreign currency, or even another digital currency, you have potential capital gains/losses. This includes any trading to other digital currencies, for example, buying ETH with BTC.

2. Can I claim discounted long-term gains tax rates?

If you sell or spend a Bitcoin that you can show you owned for more than a year, it is classed as long-term and any gains made will have favorable tax rates. The rate depends on your other income, but will wither be a flat 15% or 0%. There is a 20% rate for high income earners.

3. Can I also claim capital losses?

Short-term capital gains and losses are combined, then long-term gains and losses, and finally these totals are combined into a net gain or loss. If you have a net loss you can use it to deduct up to $3,000 taxable income per year, saving yourself $750 in taxes (25% tax rate).

4. How should I calculate cost basis? Use FIFO?

When you calculate capital gains the default and preferred method by the IRS is to use First-In-First-Out. This literally means that when you sell a Bitcoin you take the price of the first one you owned as the cost basis in order to calculate gains.

There is something else called specific identification, where you choose which coin you want to sell. Some examples of this are Last-In-First-Out or Closest-First-Out. You might use these if you want to maximize long-term gains, maximize losses or even get close to zero gain.

However, the IRS hasn't explicitly clarified which method you should use and so this is something you should talk through with your tax professional.

5. Do I need to declare mining?

The IRS treats mined coins as income on the day they are received. The value of the coin is its fair price or market value. You can use any rate table, for example bitcoinaverage.com, of your choice as long as it is consistently used.

While Bitcoin has established markets, some newer mined coins might not. How do you determine the market price of a new coin? This is another question yet to be clarified by the IRS and discussed with your tax professional. You could treat a coin without a market as having zero value, or a coin with only a BTC market as having the relative price of BTC as its value.

6. What if I am paid in Bitcoins?

If you are paid in Bitcoins, as far as the IRS is concerned, you were paid in dollars. If you were paid by an employer, it is likely the figures have already been included in your W2 and there is nothing else you need to do.

But if you received those coins, for example, from a consulting job, then you need to report the fair value of the coins as your income. Say you did some work that you would normally have been paid $1,000, but you received Bitcoins, then you report $1,000 as income in your taxes. If you just received some BTC with no equivalent USD value, then you must calculate the fair or market price of those Bitcoins when you received them, and that is your income.

7. What if I received a tip or gift?

If you were tipped, as long as it was not for any provided product or service (i.e. you didn't earn it), then it is gift and not due taxes.

If you were given the cost basis along with those tips, you can use this information to reduce any gains when you come to sell them. However, you cannot take losses from the basis of these coins, but instead have to use the market value.

8. Do I need to do anything if I only spent and not sold Bitcoin?

For tax purposes, spending Bitcoins or any digital currency, is treated as if you had just sold them. If you bought a $100 gift card with Bitcoins, you effectively sold those Bitcoins for $100, and any potential capital gains must be calculated.

There is no threshold for capital gains. Everything is supposed to be included. However, typically these figures are rounded on tax forms, so any gains less than $0.50 are ignored.

9. Can I claim charitable donations?

Making charitable donations with Bitcoin has a tax advantage when they are long-term. When you donate long-term Bitcoins (that you have owned for more than a year) to a registered charity, you get to write off the full market value of those coins as charitable deductions.

Short-term Bitcoin charitible donations can only deduct their original cost basis and not their market value.

10. Do I need to keep records?

If you were ever audited and you need to account for any capital gains, especially long-term where the tax rate is reduced, you may have to show documentation to prove your position. The burden is always on you to keep documentation and perform recordkeeping.

If an exchange you were using suddenly disappeared and you can no longer obtain your records, you might having difficulty proving any gains from any trades. You could, for example, find those long-term gains get changed to short-term.

Keep records of all your bitcoin activity.

Periodically download your trading history from any exchanges you use.

Export transaction logs from any wallets you have.

Ensure you have records for each time you spend any Bitcoins.

For tax advice, please speak to a your own tax professional, tax expert, CPA or tax attorney. This article is for information only and not to be taken as financial, tax or legal advice. It is not intended to be used by anyone for the purpose of financial advice, legal advice, tax avoidance, promoting, marketing or recommending to any other party any matter addressed herein.